On December 10, 2017, Cboe—the world’s largest options market—listed futures contracts on Bitcoin. Within a few hours, the price of the derivative jumped by 25%, and the price of Bitcoin, “built-in” in this futures contract, was 10% higher than the market average. At first, the cryptocurrency did not keep up the pace at which its price rose on the free market with the demand for futures, and then, on December 17, it broke through the maximum, setting a historical record of $20,085. A few hours later, on December 18, Bitcoin futures also appeared on another Chicago-based exchange, the CME Group, while the value of the underlying asset in a contract there was five times higher than on Cboe, at five against one Bitcoin. As a result, the effect of the high price of cryptocurrency No. 1 was able to hold out for several days.

But, in January 2018, Bitcoin began its entry into a lingering peak, the “crypto winter,” which continues unabated, overcoming 411 days and thus becoming the longest in the more than 10-year history of Satoshi Nakamoto’s creation. What is happening now with the demand for futures contracts for Bitcoin? It is now at an all-time low. The volume of transactions with such derivatives, even when the price of Bitcoin in the middle of last year fell by more than twice, reached a maximum of 2018, being comparable to the turnover of the five largest American crypto exchanges.

Futures and the Market: Weak Demand Means Weak Influence

What is going on? First off, not all analysts agree that the launch of Bitcoin futures in December 2017 caused the market to grow. The version that this was due to the additional issuance of the Tether stablecoin was put forward by researchers at the University of Texas, and in November, the Ministry of Justice started examining it, although they still did not come to unambiguous conclusions.

Still, was the growth of the market in December 2017 related to the launch of futures? It is worth noting that the fact itself could play its emotional role, but there is no evidence of this. In addition, investors are no less interested in the date of execution of the futures. On February 13, 789 contracts on Cboe were executed. Considering that initially (both on the Cboe and CME Group), the volume of transactions is small (according to February data, their number is 3,692), their influence in terms of quantity is close to zero. But this does not mean that analysts did not try to identify a pattern in the “expiration of futures and the dynamics of the cryptocurrency market.” Some argue that “the reaction to the expiration of futures traded on Cboe during the current downtrend in the market led to a fall in Bitcoin prices ranging from 1.2% to 16%.”

Meanwhile, on February 13, we saw a rise in the price of Bitcoin by 1%, so such a correlation is certainly not always observed. Analyst Danny Les is among those who do not agree that Bitcoin and the cryptocurrency market as a whole should fall after the expiration of futures for this cryptocurrency and. Jake Chervinsky, a lawyer at Kobre & Kim law firm in Washington, also recalls that Bitcoin futures from Cboe and CME Group are non-deliverable futures contracts, that is, they do not involve buying “live” Bitcoins, but only imply settlements through payments.

Bakkt Futures Won’t Change the Weather

Chervinsky suggests that the situation will be different when ICE’s Bakkt platform launches its own trading in futures, which, according to its management, will be deliverable, that is, they will have to buy “live” Bitcoins. The development of such contracts is believed to be possible with the advent of custodial services. Meanwhile, similar services that have already appeared are not in high demand. Will Bakkt futures be any different than Cboe and CME Group? Analyst Caitlin Long recalls that we are talking in general about derivatives both in the case of futures and cryptocurrency ETFs. And this means that there is no guarantee that the volume of trading in Bitcoin futures will eventually exceed the amount that will be purchased by Bakkt to back its product. A similar suspicion may arise concerning futures, which are to be launched by two more trading venues, ErisX and CoinFLEX, especially since they have not yet introduced certainty about the nature of the upcoming contracts.

No Futures Can Attract Institutional Investors

The main question, however, lies elsewhere: Can futures—and it doesn’t matter if they are deliverable or non-deliverable—Bitcoin ETF, or its counterparts in the form of Bitcoin ETN really bring billions of dollars of institutional investors to the cryptocurrency market? After all, the current futures from the Cboe and CME Group have already become an ideal tool for a typical trader on the classic stock market, but neither the low price of the underlying asset, Bitcoin, nor anything else massively lead classical investment funds into the world of cryptocurrencies—something that was recognized on February 9 by crypto millionaire Mike Novogratz.

The entrepreneur wrote on his Twitter: “Don’t understand why all the big macro funds out there don’t have a 1-percent position in BTC. Just seems logical even if you’re prone to be a skeptic.” Indeed, the portfolios of hedge funds are stuffed with a wide variety of assets, and Novogratz rejected the assumption that Bitcoin capitalization is “too small,” noting: “That’s. It true. Many funds have a position in stocks with far smaller market caps than 63bn.”

Novogratz did not say that the point was in the absence of custodial services—as they already exist, there is just no regulation—of the industry despite the well-known ambiguity of the attitude of the U.S. federal regulators toward this topic, as in most countries of the world, this cannot critically interfere with investors’ sentiments.

“Bitcoin Is a Scam”

What Novogratz did not venture to say was voiced by analyst Alex Kruger: “Macro funds consider Bitcoin to be a scam.” That is why they may not be carried away by the game in Bitcoin ETFs when it appears, although it may be a derivative based on futures or live Bitcoin, as mentioned by Daniel Peled, the CEO of Orbs.

One should not assume that this viewpoint on Bitcoin was imposed on many American investment companies, for example, by the SEC or by the political leadership of the United States. In almost all countries, governments do not see a critical threat from the cryptocurrency market, unlike what is felt at the moment in the financial market. As Randal Quarles, a high-ranking official of the U.S. Federal Reserve and the head of an international organization with the G20 Financial Stability Board, said on February 10, cryptocurrencies cannot, on the one hand, be regulated, since this is a global phenomenon comparable to gold and oil, and on the other hand, these assets can nullify any attempts to keep the global financial system in the state in which it is now.

Simply put, it is about nothing else but the panic of the representatives of the financial world like banks, insurance funds, pension management companies, and the investment businesses that feel existential risk to their existence when cryptocurrencies appear that become not just “digital gold” and “a bank in a pocket,” but “the Internet currency”, as the head and founder of Twitter and Square Jack Dorsey has repeatedly said. In such a situation, even a significant profit that can be obtained by investing in cryptocurrencies does not attract them. What then awaits the cryptocurrency market if billions of dollars of institutional investors never enter it?

States Are the Main Factor in the Mass Distribution of Cryptocurrencies

After cryptocurrency prices fell in 2018, the crypto market has become a community of true supporters of new financial technologies and not those who wanted to earn a quick buck and run back to fiat. Meanwhile, the further development of cryptocurrencies will be related not to the mass distribution among millions of people and not with the arrival of big-money investment funds and banks, but with the decisions of some states.

The most courageous political leadership will eventually be able to get significant benefits for both the economy and its own significance in the eyes of voters. So far, almost all countries look at one another and watch who will take the next step. The first point ensuring advantageous positions in terms of registering exclusive rights to cryptocurrencies and blockchain solutions was implemented by the United States and China, which are leading in this matter. Russia, for some reason, does not manifest itself in “staking out” a plot in this field, although the opening of cryptocurrency sandboxes soon may provide a chance to catch up. But no less exciting questions lie ahead. Who will be the first in the world to invest state financial reserves in cryptocurrencies? Who will start transferring pensions to cryptocurrencies? It is already obvious that this will happen, we only need to wait. And such solutions, and not futures and other financial instruments for crypto coins, will become a powerful signal for millions of companies and citizens that cryptocurrencies are worth investing.